Friday, June 13, 2008

Manufacturing

In the long run, I think we should expect Americans to continue manufacturing goods. The idea that manufacturing was shedding jobs primarily because of trade with low-wage countries is something of a misunderstanding. There's less cheap labor in Europe than in the USA but there's plenty of manufacturing over there -- rich countries just tend to manufacture higher-end goods. Even during the manufacturing drought, Americans were still "manufacturing" plenty of buildings. But the economics of cheap mortgages + construction boom + strong dollar + large trade deficit weren't sustainable over the long run and now we need to rebalance toward manufacturing fewer buildings and more stuff to sell abroad.